Shock Inflation Jump Puts Paid to Chances of a Rate Cut

Shock Inflation Jump Puts Paid to Chances of a Rate Cut

Article excerpt

HOMEOWNERS were dealt another blow today when a shock jump in inflationall but ruled out a cut in interest rates next month.

The official measure of the cost of living, the Consumer Prices Index, jumpedfrom 2.5 per cent to three per cent last month, way above City forecastsaveraging 2.6 per cent.

The April rate is just below the level at which the Bank of England GovernorMervyn King has to write a "Dear

Chancellor" letter to Alistair Darling explaining how he plans to bringinflation back to its two per cent target.

The damage was done mainly by rising gas and electricity bills, food pricesparticularly of fruit, meat and breadand increases in excise duties on alcohol.

City economists described the inflation figure as "a horrible surprise" andsaid it was now almost inconceivable that the Bank of England will lower ratesfrom five per cent when its Monetary Policy Committee meets next month.

George Buckley, chief UK economist at Deutsche Bank, said: "An interest ratecut in June is now off the table. …